The crowd of those saying the government test is overestimating bank pre-provision net revenue and underestimating economic weakness to dimish capital needs is growing. Looks like roubini and hussman just joined. They also didnt use TCE as measure of capital but used 'Tier 1 Common Capital', that excludes Other Comprehensive Income(Mainly mark-to-market on level 3 assets). This should work now that everyone is on crystal meth but when the mood changes it will be hard to convince the market that market prices don't matter http://ftalphaville.ft.com/blog/200...apital-shortfall-could-have-been-68bn-bigger/ Hussman is saying that losses from 2011 and 2012 are excluded dimishing capital needs. That is not entirely correct as the banks were asked to estimate their loss reserves for 2011 and add to 2010 reserve levels. But since this was a self-test its very likely they underestimated everything
Meredith Whitney makes negative comments on CNBC; says 2010, 2011 earnings are going to be "so far below consensus" for the banks
Heres the vid http://www.businessinsider.com/meredith-whitney-i-predicted-the-bank-rally-2009-5 Her JPM thesis is like mine, stock is absurdly rich compared to likely forward earnings. Stress test earnings estimates for JP is -$25B in net losses for the period 2009-2010 and that is using BS numbers I'm particularly concerned she thinks Q2 and Q3 could have more BS earnings reports, if the market doesnt catch on the lies by then some of my puts will expire worthless
Q2 especially because alot of banks haven't played the "m2m rule changes " card yet. I don't know these stocks are yup HUGE. fitb is up 800% since yr low. Now MBI beats and stock breaks out. It all looks like fiction to me but the market seems to buy it at face value. Frankly I think alot of it is people got greedy and starting shorting these things big time and then got squeezed one stock @ a time. Truly jaw dropping stuff as Meredith said.
Back in Feb/Mar when stocks were tanking nobody could see any 'catalyst' that would send stocks higher, it was popular to be bearish and have ultra low price targets in the SP500, then everybody was surprised when the market went the other way. Now we are seeing the same thing, people have big targets and they cant see a catalyst bringing the market down anytime soon. The catalyst here could be the 'reflexivity' of people being so bullish and creating expectations that cant be met, people could be creating their own downfall
this market just won't break. I got a feeling we might see yet another run higher into expiry friday.
Never like shorting GS, but it stuck out like a sore thumb this AM after all the simpleminded blindly bought it following his upgrade. Banks were getting hammered early and it was up $3 along with MS up .45 They were the only green things on my screen except for oil and the SKF's. Came in nicely.
I made a big mistake in shorting GS too soon but I will hang in there. If the more adverse scenario plays out goldman will make $1b for period 2009-2010, forward earnings expect them to make huge money, the market doesnt seem to realize that these companies are resetting to a new level of revenues because they cant play games with securitization and other activities, meanwhile they need to compensate their people. They also have stuff off-balance sheet that could blow up This POS is worth much less than the market thinks